Since the reform and opening up, China’s economy has grown rapidly, and people’s living consumption level has greatly improved. With the change of development stage, people’s yearning for a better life is stronger, and the demand for upgrading the stock of consumer goods is constantly improving. Promoting the trade-in of consumer goods and releasing potential consumption is conducive to the formation of a higher level of dynamic balance between demand and supply, and supply creates demand. In March, 2024, the State Council issued the Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods, proposing the implementation of trade-in of consumer goods.
Consumption of durable goods has shifted from incremental expansion to stock optimization.
What trade-in actions did the consumer goods market experience in the past? What is the development situation and effect?
Chen Lifen (Researcher, Institute of Market Economy, the State Council Development Research Center):The nationwide trade-in policy for consumer goods is not the first time. In order to cope with the international financial crisis in 2008 and expand consumer demand, from 2009 to 2011, China implemented a vigorous trade-in policy for household appliances and automobiles.
In 2009, the Implementation Plan for Promoting the Expansion of Domestic Demand and Encouraging the Trade-in of Automobile and Household Appliances proposed that nine provinces and cities, including Beijing, Tianjin, Shanghai, Jiangsu, Zhejiang, Shandong, Guangdong, Fuzhou and Changsha, should be selected to carry out the trade-in of household appliances. Since June 1, 2010, the policy of replacing old household appliances with new ones has been gradually extended to the whole country in combination with the dismantling and handling capacity of old household appliances in various regions. From this round of trade-in policy, it is mainly to stimulate the elimination and renewal potential of durable consumer goods such as household appliances and automobiles through replacement subsidies, further expand domestic demand, especially consumer demand, promote energy conservation and emission reduction, develop circular economy, and stabilize and expand employment. On the one hand, the central finance and the pilot provincial and municipal finance work together to share the subsidy funds. In terms of household appliances, the central finance and provincial finance bear 80% and 20% respectively. For automobiles, subsidies will be given to those who scrap "yellow-label vehicles" in advance and buy new ones. Local authorities can adjust the subsidy standards according to the models, years and urban management of "yellow-label vehicles". On the other hand, establish an effective incentive mechanism to stimulate consumption potential and benefit enterprises and the people. Subsidies will be given to consumers who sell five types of old household appliances, such as televisions, refrigerators, washing machines, computers and air conditioners, and buy new ones. The subsidies for buying old ones will not exceed 10% of the sales price of household appliances, and the transportation expenses will be subsidized for the old ones that are within the scope of recycling subsidies and sent to dismantling and processing enterprises.
The trade-in policy has achieved good results, and the pilot provinces and cities have initially established an integrated network system for home appliance sales, recycling and dismantling, which has obvious economic, social and resource benefits.
The first is to effectively stimulate consumption. In the 21st century, the growth rate of per capita disposable income of residents has been accelerated, the consumption power has been significantly improved, and the consumption demand of durable goods has increased. The trade-in policy has played a good "catalytic" role in stimulating the consumption growth of durable goods. Automobile-related policies continued until the end of 2010, and about 460,000 vehicles were subsidized for car trade-in, which boosted the consumption of new cars by 49.6 billion yuan. The policies related to household appliances continued until the end of 2011, and 92.48 million new household appliances in five categories were sold, which boosted direct consumption by more than 342 billion yuan, effectively releasing the consumption potential of urban residents.
The second is to promote the production and marketing of durable consumer goods and promote industrial development. In terms of home appliances, in 2011, the trade-in sales of home appliances exceeded 110 billion yuan, accounting for about 1/5 of the total sales of home appliances that year. With the policy of home appliances going to the countryside, the number of home appliances in rural areas has greatly increased. In 2012, the number of refrigerators, air conditioners, washing machines and color TVs per 100 rural households increased by 41.2, 16.8, 21.3 and 22.5 respectively compared with 2007. In terms of automobiles, since China joined the World Trade Organization in 2001, the automobile industry has been steadily opening to the outside world, while private automobile enterprises have accelerated their development. In addition, residents’ income has increased substantially, and private automobile consumption has flourished. At present, some cars have reached the replacement period, there are more products to choose from in the market, and the demand for changing cars among residents has increased. In 2009, China’s automobile production and sales exceeded 10 million vehicles. According to statistics, in 2010, the number of subsidized cars was the highest, accounting for 46.4%.
The third is to promote energy conservation and emission reduction and develop circular economy. With the acceleration of industrialization and urbanization, it is urgent to change the extensive growth mode. In 2005, "Several Opinions of the State Council on Accelerating the Development of Circular Economy" was issued, proposing "to realize the unification of economic, environmental and social benefits and build a resource-saving and environment-friendly society". Thanks to the promotion of the trade-in policy, the energy efficiency of automobiles and household appliances has been significantly improved. The fuel consumption of old automobiles is 5% to 10% higher than that of new ones, and the power consumption of old household appliances is 20% to 30% higher than that of new ones.
The fourth is to stabilize and expand employment. Household appliances, automobiles and other durable consumer goods have a long industrial chain, and the trade-in policy not only promotes the development of retail industry, but also promotes the development of logistics, after-sales service, recycling and dismantling industries, which are labor-intensive industries and have strong ability to absorb employment. It is estimated that there are more than 400,000 employees who serve the trade-in of household appliances. This round of trade-in of consumer goods has effectively expanded the scale of employment.
In the new round of trade-in of consumer goods, the replacement of durable goods is still the focus of stimulating consumption potential, but different from the last round, the growth of residents’ durable goods consumption is mainly reflected in structural changes, driven by incremental expansion and more driven by stock optimization. By the end of 2023, the number of automobiles in China was 336 million, and the number of refrigerators, washing machines, air conditioners and other major categories of household appliances exceeded 3 billion. There is great demand and potential for upgrading automobiles and household appliances. It is worth noting that from the situation and effect of the last round of trade-in, there are still some problems in recycling and dismantling, such as the recycling enterprises can not obtain invoices for tax deduction, the coverage of dismantling enterprises is small, and some household appliances are recycled by small vendors and then flow into the second-hand market. At present, the recycling system of household appliances, automobiles and other durable goods in China is not perfect, there are few qualified recycling enterprises, many decentralized self-employed households and a lack of professional and technical personnel, and the proportion of waste household appliances recycled through formal channels is not high. Therefore, it is very important to build a closed loop of "replacement+recycling" and improve the recycling system. The new round of trade-in of consumer goods may bring about the centralized release of demand. It is suggested to benchmark the international advanced level, give play to the leading role of standards such as energy saving, low carbon, health and safety, promote the development of industrial upgrading and consumption upgrading in the same direction, guide the updated consumption and echelon consumption in an orderly manner, and release the consumption potential continuously and stably.
Grasp the key links and make precise efforts.
Why launch a new round of consumer goods trade-in? What is the market demand and development potential of consumer goods in China?
Wei Qijia (Director and Researcher, Industrial Economics Research Office, Economic Forecasting Department, National Information Center):Looking at the trade-in of consumer goods should not be limited to the consumer goods themselves, but should be understood from the perspective of economic cycle. Carrying out a new round of trade-in of consumer goods accurately and orderly is an important measure to expand effective demand and smooth the cycle of supply and demand. The implementation of this policy is conducive to the formation of a virtuous circle of mutual promotion of consumption and investment, and the realization of benefiting enterprises and the people.
It is timely to promote a new round of trade-in of consumer goods. After the smooth transition of epidemic prevention and control, consumption recovery needs a process, and it can get twice the result with half the effort to really boost consumption from the needs of thousands of households. The data shows that by the end of 2023, the number of cars in China reached 336 million, and the number of household appliances in major categories such as refrigerators, washing machines and air conditioners exceeded 3 billion. According to this volume estimate, the upgrading of automobiles and household appliances is expected to create a market space of one trillion yuan. In terms of related consumption potential and growth rate, in the first quarter of this year, the retail sales of consumer goods such as household appliances and audio-visual equipment were 205.3 billion yuan, up 5.8% year-on-year, the retail sales of sports and entertainment products were 30.7 billion yuan, up 14.2% year-on-year, and the retail sales of automobiles were 1,116.3 billion yuan, up 3.8% year-on-year. From the perspective of absolute quantity and growth rate, these consumer goods have a large market space. If the policy can play a better role, it will be able to release huge demand and play a more significant role in supporting and promoting economic growth. From a broader perspective, as the economy stabilizes and rebounds, the consumption growth potential will be further released. At present, accelerating the trade-in of consumer goods will help stimulate consumption potential. The data shows that the total retail sales of consumer goods in the first quarter of this year exceeded 12 trillion yuan, up 4.7% year-on-year, and there is still room for improvement. The recovery of consumption is a slow variable, but the trend of accelerating recovery is emerging.
The new round of trade-in of consumer goods focuses on the fields of automobiles, household appliances, home improvement, kitchen and bathroom, which is closely related to the development stage of China’s economy. The data shows that the urbanization rate of permanent residents is 66.2% in 2023, but the urbanization rate of registered population is less than 50%. The urbanization process is progressing steadily, and the consumer market still has great potential. At the present stage, consumers’ demand for automobiles, home appliances and home improvement kitchens and bathrooms has a large room for growth. Promoting trade-in in these areas can boost consumption and help improve the consumption environment. From the perspective of industrial development, on the one hand, it provides a driving force for the convergence of production and demand, keeping inventory and sales in a dynamic balance, on the other hand, it is conducive to broadening the sales channels of energy-saving products and further enhancing their market share. Recycling is an important focus of industrial green development. Trade-in of consumer goods will innovate and enrich application scenarios and promote high-quality economic development.
Promoting a new round of trade-in of consumer goods is a systematic project, which requires precise efforts in policy and a good grasp of the three key links of "standard clearance", "capital clearance" and "operation clearance".
"Standard Pass" emphasizes the leading role of highlighting standards. Reasonable standards can promote the healthy development of the industry and promote the improvement of product quality, while backward standards are not conducive to product upgrading. For consumer goods, standards are very important. Taking the automobile industry as an example, the mandatory scrapping standards for motor vehicles and the vehicle safety and environmental protection inspection standards are directly related to the cycle of automobile product upgrading, involving equipment safety issues, and need to form a long-term mechanism conducive to the implementation of standards. Taking home appliances as an example, energy consumption standards affect the product system construction of the whole industry. Only when the relevant standards are dynamically updated can the preferential policies related to the buyer play an effective role. In addition to "hard standards", "soft standards" are also indispensable. For example, the definition of recycling valuation needs a frame of reference, a reference object, and a clear calculation process and standards, so as to promote the smooth operation of all aspects of trade-in.
"Capital Pass" emphasizes the optimization of various financial support methods. Financial support is not "flood irrigation", it is not for the sake of support, and it must be accurate and effective. For the trade-in of consumer goods to be supported, it is necessary to comprehensively calculate the amount and proportion of financial support from various information resources and set a reasonable range. For example, the insurance premium rate of new energy vehicles and the down payment ratio of automobile consumption loans all have the problem of optimizing the ratio and effect. Setting a suitable ratio is conducive to the healthy development of the industry. At the same time, we should define the source of funds. Some need financial support, but it doesn’t mean that financial funds can do everything. It is suggested to guide producers to make a balanced calculation according to sales quantity, pricing and profit, and promote trade-in by flexibly adjusting prices.
"Operation Pass" emphasizes the cooperation of the whole chain, such as dismantling and recycling, construction of the main body of operation and after-sales service. From the perspective of policy promotion and implementation, the above link is the "last mile" and will promote the full release of policy dividends. The whole chain link involved in trade-in has a complete and relatively independent internal system, so how to achieve connectivity, penetration, specialization and standardization of the operating subject is very important. It is suggested that by cultivating specialized enterprises, the closed-loop circulation of second-hand goods can be realized, the integration of resources in the whole chain can be promoted, and the after-sales service level can be brought into the big network of trade-in, which will form a strong traction for the accurate and orderly development of trade-in business.
Multi-measures to stimulate consumption vitality and achieve remarkable results
What measures have been taken by various localities to support trade-in? What are the bottlenecks to form the scale effect of upgrading?
Yi Shaohua (Director and Researcher, national academy of economic strategy Market Circulation and Consumption Research Office):With the steady improvement of China’s economic development level and the increasing consumption power of residents, higher requirements are put forward for the quality of consumer goods, and the focus of consumption has changed from survival to development. In the field of physical commodity consumption, some consumer goods markets, represented by automobiles and household appliances, have entered the stage of paying equal attention to stock and increment from the incremental stage. By exchanging the old for the new, it can not only stimulate potential consumption, but also better meet the people’s needs for a better life and form a virtuous circle of mutual promotion of consumption and investment.
At present, the trade-in of consumer goods mainly includes durable consumer goods, bulk consumer goods, such as household appliances, electronic products, automobiles, etc., and joint promotion activities are carried out through government support and profit-making by enterprises. Encouraged by policies, various localities have stimulated consumption vitality and facilitated consumer groups in various ways, and achieved positive results.
Jiangbei New District, Nanjing City, Jiangsu Province, combined with Nanjing International Consumer Festival (Spring) activities, with the theme of "revitalizing the new season", distributed a total of 10 million yuan of automobile consumption subsidies. The Municipal Bureau of Commerce cooperated with two leading enterprises, Suning.cn and JD.COM, to carry out home appliance trade-in activities. JD.COM Wuxing Electric Co., Ltd., in conjunction with the head brand of household appliances, will increase subsidies for trade-in for air conditioners, color TVs, cooking stoves, digital mobile phones and other categories, with a maximum subsidy of 4,000 yuan for a single unit; Suning.cn provides free door-to-door, disassembly, handling and other services, making it more convenient for consumers to replace their home appliances.
The Department of Commerce of Guangxi Zhuang Autonomous Region arranged 16 million yuan to carry out the subsidy activity of replacing old household appliances with new ones. By means of government subsidies, business concessions and platform support, the channel of industry cooperation was opened through the renovation of second-hand houses and old residential quarters, and the home improvement business was catalyzed by home appliance resources, thus promoting the upgrading of home appliances. Take Liuzhou as an example, the city provides diversified supplies and services according to the differentiated needs of consumers, providing consumers with one-stop transformation services of personalized design, garbage removal and preferential replacement, which directly promotes the release of household appliances consumption demand.
Shenyang City, Liaoning Province, through the joint subsidy of home appliance sales enterprises and manufacturers, increased the intensity of trade-in. At the same time, it organized home appliance distribution enterprises to join community streets to carry out trade-in public welfare activities, and provided services such as free cleaning and free testing of home appliances for special people. Hainan Province subsidizes the scrapping and replacement of old cars and the purchase of green household appliances, organizes household appliance enterprises in the province to carry out trade-in activities, encourages tax-free enterprises to give preferential benefits, and forms a multi-party linkage promotion trend. In terms of home improvement and kitchen renovation, Hunan Province has carried out activities such as home rejuvenation season, home improvement consumption festival and home consumption festival, and built 100 green, intelligent and aging-suitable model rooms in the province, taking the model rooms as a demonstration to lead the home improvement and renovation activities, so that consumers can feel the charm of smart life on the spot.
Of course, there are still some bottlenecks that need to be broken.
First, the innovation of financial instruments is insufficient, and the profit margin of enterprises is limited. Trade-in of consumer goods involves a wide range, showing the characteristics of long cycle and large span. It is difficult to achieve it by the enterprise itself. It needs to be supported by fiscal and taxation policies and financial instrument innovation to ease the financial pressure of enterprises and release policy dividends. At present, some financial institutions have made useful explorations in this regard. For example, Fujian Branch of China Construction Bank launched the "five new" measures to update financial support equipment and trade-in consumer goods from the aspects of support equipment, product innovation, consumption scenarios, preferential activities and policy guidance, which effectively improved the quality and efficiency of financial services, helped expand domestic demand and promoted consumption.
Second, it is necessary to find the right entry point to stimulate consumers to change their motivation. Although residents have a demand for upgrading consumer goods, there are many influencing factors. Durable consumer goods such as household appliances are large-sized goods, and the price of a single product is high. Most consumers rarely change their products when they can use them. Even if there are some price concessions, most people are difficult to put them into action. At present, the recycling price of old household appliances, old furniture and other items is low, which is far from consumers’ psychological expectations, and has also become one of the factors affecting trade-in. It is still a challenge to push consumers to turn potential demand into real demand and make them willing to change and actively change.
Third, the recycling system of used household appliances needs to be improved. In the process of releasing the demand for the replacement of household appliances, the recycling of waste household appliances is facing difficulties. Some household appliances and furniture manufacturers give up recycling related products because of the high recycling cost. At the same time, factors such as the lack of storage space for waste goods and the difficulty of recycling vehicles entering the city have also restricted the expansion of the market scale of household appliances and furniture. It is suggested to build a regional transfer station for waste household appliances in a suitable place, collect waste household appliances and furniture at home through platforms, merchants and third-party resources, and transport them to the dismantling site. At the same time, home appliance manufacturers are encouraged to build a recycling system of "recycling-dismantling-regeneration-remanufacturing" to achieve green and low-carbon development.
Let the recycling of old goods be efficient and smooth
How to realize efficient recycling of old goods with new ones?
Peng Bo (researcher, Institute of International Trade and Economic Cooperation, Ministry of Commerce):In March 2024, the State Council issued the Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods (hereinafter referred to as the Action Plan). According to the Action Plan, the replaced consumer goods can be recycled efficiently through the circulation of second-hand goods, remanufacturing, step-by-step utilization and recycling.
The Action Plan proposes to support the circulation of second-hand commodities. The complete automobile market includes new car and used car market, and the trading volume of used cars in major developed countries exceeds that of new cars. By the end of 2023, China’s car ownership reached 336 million, with 34.8 million newly registered motor vehicles, and the cumulative transaction volume of used cars nationwide was 18.4133 million, up 14.88% year-on-year. In terms of export, the export volume of used cars in China exceeded 100,000 vehicles in 2023, accounting for only 2% of the total export scale of 4.91 million vehicles. Most of them are parallel export vehicles, and the used car market has broad development potential.
The market potential of second-hand electronic products is huge. Apple once launched the iPhone trade-in business in the United States. Consumers can exchange old iPhones for certain points in the Apple Store and offset them when buying a new generation of mobile phones. In recent years, China’s mobile phone and home appliance market is developing with each passing day, product updating iteration is fast, and consumer demand is growing rapidly. The data shows that in 2023, China’s total mobile phone shipments totaled 289 million units, and the idle amount of used mobile phones increased year by year. It is estimated that the total idle amount will reach 6 billion units during the 14 th Five-Year Plan period. Trade-in will accelerate the update iteration of mobile phone production, and the electronic product industry will usher in greater development space.
Second-hand furniture transactions continue to develop. According to the survey data of Beijing Municipal Bureau of Statistics, among more than 3,000 citizens who participated in the survey, 11.1% of the respondents abandoned large furniture in 2023, and 46.5% of them chose to sell waste products. Furniture with good color and brand will usually be sent to the second-hand market for resale, among which solid wood and second-hand furniture with certain collection value are relatively popular.
The Action Plan proposes to promote remanufacturing and step-by-step utilization in an orderly manner. This requirement also applies to consumer goods. The earliest "remanufacturing" appeared in the 1930s. In 2010, the National Development and Reform Commission and other departments jointly issued "Opinions on Promoting the Development of Remanufacturing Industry", which proposed that remanufacturing can save energy by 60%, materials by 70% and costs by 50% compared with manufacturing new products, and almost no solid waste is produced, and the emission of air pollutants is reduced by more than 80%. At present, the market size of the global remanufacturing industry has exceeded 150 billion US dollars. The annual output value of China’s remanufacturing industry has exceeded 100 billion yuan, making it one of the largest remanufacturing markets in the world.
The price of engine remanufactured products of Jinan Fuqiang Power Co., Ltd. is only 75% of the original price of new products. If the old engine is exchanged for remanufactured products, it can also offset 25% of the price. BYD is committed to the production of new energy vehicles, and attaches great importance to the remanufacturing and cascade utilization of automotive power batteries. When the available capacity of the power battery is 60% to 80%, which can not meet the use requirements, the waste power battery will be recycled for testing and maintenance, and then sent to the power and communication fields for building energy storage power stations after reorganization; When the available capacity of the power battery is further attenuated to 20% to 60%, it can be recycled and disassembled into single batteries for solar street lamps, UPS power supplies and other small energy storage tools. When the usable capacity decays to less than 20%, it will be scrapped, from which useful chemical components and metal elements will be extracted and recovered for the production of new power batteries. Gemei is one of the leading enterprises to recycle electronic wastes and used batteries economically and on a large scale, and has built a life cycle value chain from recycling, remanufacturing to step-by-step utilization to ensure the efficient recycling of used power batteries.
The Action Plan proposes to promote high-level recycling of resources. Improving the ability and level of resource recycling can significantly reduce the demand for primary resources and reduce the pressure of mineral resources exploitation on the natural environment.
According to the statistics of China Renewable Resources Recycling Association, in 2023, the amount of scrapped cars increased by 7.56 million, up by 32%, the amount of recycled furniture exceeded 200 million, the total amount of recycled household appliances reached 4.5 million tons, and the amount of discarded mobile phones could reach more than 400 million every year. It is estimated that after a scrapped small car is finely disassembled, it can decompose about 36 kilograms of rubber, 70 kilograms of plastic, 740 kilograms of scrap iron and 100 kilograms of aluminum; An ordinary refrigerator can recover 9 kilograms of plastic, 38.6 kilograms of iron and 1.4 kilograms of copper; One ton of used mobile phones can extract 400 grams of gold and 2300 grams of silver.
Miluo City, Hunan Province has gathered more than 100 enterprises specializing in the treatment of used household appliances, forming a relatively complete industrial chain, and nearly 10,000 tons of usable substances are obtained after recycling and dismantling used household appliances every day. Among them, recycled metals are sold to auto parts manufacturers in this city for reproduction, which is environmentally friendly and reduces production costs. Haier Group practices the concept of sustainable development, supports the green and sustainable development of the whole industrial chain, and builds the industry’s first home appliance recycling interconnected factory integrating "recycling-dismantling-recycling-reuse", covering three systems of recycling, dismantling and recycling, and has customized six dismantling lines for used household appliances, one cleaning and sorting line for recycled plastics and 13 high-quality recycling new material granulation lines. At present, the factory has an annual dismantling capacity of 2 million sets of waste household appliances and a recycling capacity of 30,000 tons of recycled materials.
